Sales Compensation Does Not Stand Alone

Sales compensation needs to be compatible with performance programs.

When asked, sales leaders list “improving sales productivity” as their top priority.* This means increasing sales yield per salesperson. The objective is to grow sales volume at a faster rate than the growth in sales costs, thus improving return on sales investment. When possible, do both: Grow sales and decrease the absolute cost of selling.

For sales leaders, the hunt is always on to improve sales productivity. We know that sales compensation contributes to improving sales productivity, but it does not stand alone.

Sales Performance Programs

Sales compensation sits among an array of sales performance programs, including the company’s value proposition, sales culture, sales strategy, talent, sales training, professional development, sales supervision, personal and public progress and numerous sales reward programs including sales compensation.

Updating the sales compensation program might improve sales productivity but getting companion programs right is just as important; maybe more so.

Each of the following sales performance programs contributes to improving sales productivity.

Company Value Proposition and Sales Culture. Do your sellers believe in your product? The company’s value proposition—what the company offers customers—forms the basis of seller allegiance. Products that improve customer outcomes will inspire sellers to promote and persuade customers to purchase. A sales culture that celebrates sales excellence, seller competency and integrity will win seller engagement. It’s leadership’s responsibility to offer compelling customer value propositions that sellers embrace. Exceptional sales leadership builds a sales culture of engagement, accountability, collaboration and acknowledgment of success. Leadership instills the mission: “Here is why customers need us.” Sellers need to have a customer mission not just a sales job.

Sales Strategy. Are your sellers correctly aligned with the buyer journey? Go-to-customer design requires mapping the customer experience and placing sellers at the buyer’s inflection point when additional knowledge, risk reduction and purchase assurance encourages customer purchasing. Sales strategy planning continually examines customer preferred buying patterns and provisions marketing, selling and service resources (both digital and personal contact) with the right configuration of customer contact resources. Sellers need to be in the right place, saying the right things at the right time.

Talent. Do you have the best sellers? Sales productivity improvement depends on the caliber of the hired sales talent. Do your sellers have the potential for sales excellence? Do they possess the desire and capacity to learn their sales skills, continually improve their effectiveness and apply their full efforts to sales success? Recruiting outcomes work best when a professional staffing function applies company standards to sourcing, assessing and hiring the right talent. When a current seller fails to meet expectations, a supportive PIP (performance improvement plan) should provide a reasonable opportunity to correct performance or a graceful and supportive exit of the organization.

Sales Training. The best productivity investments rest with sales training. This begins with a well-articulated onboarding process to learn internal systems, understand products and applications, gain customer insights, bond with team members and enculturate new sellers—why we are here, why our work contributes to company and customer success and how we conduct ourselves. Training continues by learning advanced sales/customer techniques, access to just-in-time knowledge and sales execution excellence. Certification programs, mentors, learning management systems, behavior modeling and predictive selling systems all contribute to sellers’ growing competencies.

Sales Supervision. Sales supervisors have the greatest positive impact on their sellers when they act as coaches helping sellers learn skills, assess mistakes, manage emotions and celebrate victories. Use affirmative management rather than judgment management practices. Affirmative management assumes that sellers wish to succeed. Use positive encouragement: Each success is a personal confirmation, and each setback is a learning opportunity. Judgment management—a critical focus on failures—is less effective. It suppresses open learning and induces unhealthy avoidance behaviors.

Personal and Public Progress. Great salespeople want to improve their performance. They want reports, charts and indices to see how they are performing against their assigned goals. They want to be a member of a supportive and encouraging work group so they can review their progress with their peers, see their rankings, get advice from others and celebrate successes. Weekly sales funnel calls should be about selling successes and less about failures. Additionally, management should encourage sellers to develop unique sales solutions to address challenging sales opportunities. Sales management should celebrate new, creative techniques and share them with others complimenting the creative seller for their initiative and ingenuity.

Professional Development. The company should have a well-articulated professional development program with annual reviews, career planning and development commitments. The annual review should give the seller an opportunity to assess progress-to-date and set goals for further improvements.  Career planning includes progression to more responsible selling roles, specialist opportunities and sales management. Development commitments confirm how leadership will give each seller learning and accountability opportunities to contribute to personal and professional growth.

Reward Programs. In addition to sales compensation, there are numerous reward programs, including contests/spiffs, merit increases and recognition events. These programs need to align with the overall sales strategy and work in concert with each other including the sales compensation plan. Sales management should use contests and spiffs to support marketing campaigns, new products and timely sales initiatives. The annual merit increase program should keep sellers’ total compensation aligned with labor market levels and reward exceptional performance, sales collaboration and growth in professional competencies. Recognition programs should celebrate sales successes. Ongoing memos of personal accomplishments, public acclaim of sales success and annual recognition events contribute to affirmation of sales culture excellence.

Sales Compensation

Here is the challenge for sales compensation stakeholders: What is the role of sales compensation among other productivity improvement efforts? What are common misconceptions about sales compensation? And, how does sales leadership align all sales performance programs?

Sales performance programs build sales competencies and reward outcomes. Both objectives play a role in improving sales productivity. Leaders use company value propositions, sales culture, talent, sales training, personal and public progress, and professional development to build sales competencies.

Sales management uses reward programs to recognize outcomes. Sales management can use contest/spiff success to reward short-term objectives, merit increases to recognize professional growth and recognition programs to celebrate seller outcomes.

The best use of sales compensation is to reward tangible sales results.

Well-designed sales compensation plans have output performance measures that reward expected sales outcomes for the sales job. Each job has its own sales compensation plan featuring unique measures for the sales role. These measures are carefully selected, reviewed once a year and aligned with the preferred outcomes for the sales job.

Sales compensation is not intended to instill loyalty, drive culture or reward professional competency.  Other sales management programs excel better at these objectives.

Sales compensation formulas provide rewards consistent with market practices: low, median and high performer payouts match or exceed market practices. The subcomponents of a successful sales compensation plan, such as quotas, account assignment practices and sales crediting rules, contribute to ensuring the payout formula is rewarding seller-driven sales success.

Getting Program Alignment

Sales compensation is one of many sales performance programs. Leaders must view sales compensation within the context of these various programs. Sales compensation stakeholders/designers need to evaluate the whole family of programs to test for strengths and weaknesses in alignment, messaging, measurement and rewards to ensure clarity to the sales team.

An annual review of all sales performance programs is an excellent assessment objective. What is the best way to accomplish this? Start with this question, “What are each of the performance programs saying to our sellers?” Then continue, “Do these programs make sense? Are they consistent with each other? Do they correctly align our sellers with the company mission and sales culture?” Sales management may be surprised to discover the extent of misalignment among the various sales performance programs.

*Alexander Group’s Sales Compensation Trends Surveys, as reported each year since 2002